Opinion: More competition in car finance benefits customer

Since the late 80’s there has been a gradual change in the scenario and post liberalization of the Indian economy, the middle class and upwardly mobile population has increased quite significantly.ETAuto | September 05, 2017, 14:56 IST

Car finance offered by dealers has seen the fastest growth, making up 30 percent of credit.By Kaushik Banerjee, President and CEO, Asset Finance Business at Magma

A few decades ago, having own’s car was a luxury in India and we all had of 3-4 models to choose from. People used to depend on public transport and two-wheelers.

However, since the late 80’s there has been a gradual change in the scenario and post liberalization of the Indian economy, the middle class and upwardly mobile population has increased quite significantly.

Further, the number of models available at various price points rapidly increased from late 90s onwards.

Cars are purchased for both personal use as well as for commercial applications (taxis). With the advent of taxi services, liberal pension schemes and pay commission revisions benefiting a large segment of government employees and a sharp increase in employment in the services sector like IT and banking and financial services coupled with easy availability of finance options for purchase of vehicles from banks and non-banks to cater different profiles and segments of car buyers, there has been an exponential increase in car sales, majority of which are financed.

A robust market for pre-owned cars has also developed and it is estimated that the size of the second hand market is almost as large as that of new cars. In addition to banks and NBFCs many manufacturers have their own financing arms.

It is estimated that India’s new passenger vehicle finance market will double to over Rs 160,000 crore from 2014-15 levels by the turn of the decade, according to a report by Ernst & Young (E&Y).

This is also largely due to the market becoming increasing organized with manufacturers offering pre-owned vehicles through their own branded channels and the rapid development of the internet with pre-owned vehicles being offered for sale on-line along with finance options.

The car finance market has emerged as one of the more stable and consistent segments for retail asset finance in India.

With higher disposable incomes, a young population, an increasing number of models being introduced, shorter first owner life cycles, a robust pre-owned market, improved technology, increasing awareness and usage of on-line options and a significant improvement in road networks, the consumer-borrower will continue to reap the benefits of increasingly competitive interest rates and better and faster service from both lenders and sellers. It is certainly Ache Din for a car buyer!